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Can a merchant require ID for a credit or debit card purchase?

Consumer Reports News: February 25, 2011 08:08 AM

Recently I was making a small purchase using my MasterCard at a Kmart store outside of Chicago. I was surprised when the cashier asked me for identification. When I objected, a store manager told me that a new nationwide Sears-Kmart policy requires ID for all credit card purchases.

That was news to me, especially since I had made a MasterCard purchase in that very store earlier in the day, and no one asked for an ID.

I recently checked with managers at two Illinois Kmarts, as well as with Sears-Kmart customer service, and was told the same thing.

Then I called a Sears Holdings Corp. spokeswoman, who said all those employees I spoke to earlier are wrong. The company requires cardholder ID only if the signature is missing from the card or doesn't match what the customer signs during checkout.

"Sometimes our associates may take a level of security into their own hands, and we have to work with them," company spokeswoman Shannelle Armstrong said. She added that the company will take measures to ensure its employees know the correct policy.

I decided to find out what the credit card companies say about requiring cardholder ID. Here's the lowdown.

Both Visa and MasterCard prohibit merchants from requiring customer ID as a condition for accepting their credit or debit cards. All you need is a signed card, and of course the signatures must match.

American Express says it doesn't ban merchants from requiring customer ID, though it discourages the practice. But it does ban merchants from treating Amex holders differently than any other cardholder. Discover told us that merchants are free to request ID if they want to.

If you're a Visa cardholder and a merchant presses you for an ID, Visa says you should notify your card issuer. In the case of Amex, notify American Express directly. MasterCard customers should report the violation by visiting the company's merchant violation web page.

Incidentally, the California Supreme Court recently ruled that merchants in that state cannot collect zip codes from credit card customers in most cases. In the case before the court, retailer Williams-Sonoma requested and recorded cardholder zip codes, which it would then use to search telephone databases to identify customer addresses. Those addresses then would be used for marketing and might be sold to other businesses.

The decision is based on a California law prohibiting the collecting of "personal identification information" from cardholders. Among the exceptions are purchases from gas pumps and when the card is used for cash advances and most deposits. The law does not ban merchants from requiring IDs as a condition to accepting a credit card, as long as the information isn't recorded.—Anthony Giorgianni